Monday, November 12, 2012

Commodities Now Looking Good

The Nifty after touching a high of 5777, just short of the previous high of 5815, has turned down again and closed 55 points in the red and has come back into the range of 5630-5730 that it was moving within. As of now, there is nothing to suggest that the Nifty has finished its uptrend and therefore we shall wait for some more time before taking short positions again. However, there is one thing that is causing concern. On 1st Nov, the Nofty made a high of 5649, while the next day the low was 5682, a gap of 33 points which was still unfilled. The lowest low the Nifty had made since then was 5679. Today, it made a low of 5677 and thus has come back into the 'uncharted territory'. This suggests that the gap may now be filled. While it should find support near 5650, but a move below that would be bearish.

Attached above is the daily chart of Aluminium. As seen from the chart, the prices had started rising from a low of 100.60 in mid Aug to a high of 117.55 in a month's time and then started falling and fell relentlessly till it had a 100% retracement to make a low of 100.70. Attached below is the weekly chart of Aluminium and shows that it has been moving within a range of 100-116 since July 2010 (except for a brief spell of about 45 days when it traded outside that range on the upside. This shows that the 100 support is very strong which has been tested and held successfully on a number of occasions in the last 28 months. And such a strong support is unlikely to be broken easily.
Coming back to the daily chart of Aluminium, we find that after making a low of 100.70, is now trying to go higher but is repeatedly finding resistance near the 23.6% Fibonacci retracement level of 104.68. As mentioned in a few of my earlier posts, such a large move in any direction is usually accompanied by a fairly large retracement too. Though, a retracement to the 78.6% retracement of 114 is also possible, but I think keeping a target of 111 at the 61.8% retracement level should not be expecting too much. A level of 111 seems more reasonable, especially because it has found resistance near these levels in the past too. Though, it may very well start going up from here too but I have a feeling that it may come down to 101-102 before moving up again. Whether it does, or it doesn't, Aluminium is clearly a buy on dips commodity with a stop loss of 100 for targets of 111, 114 and then 116.
Attached above is the weekly chart of Nickel. The yellow line shown on the chart is just a horizontal line at 850. But the price movements have been such that it seems as if it is a wonderful trendline and see, how beautiful it is. Last three years the line has held despite being tested 7 times till now. The latest movement shows that again it has turned upwards after touching 850. Lets come to the daily chart of Nickel which has been attached below. As seen from the chart, it's a chart very similar to Aluminium. An upmove, a 100% retracement, an upward turn and now finiding resistance at the 23.6% retracement level.
As was the case in Aluminium, here too, I expect that every dip should be used as a buying opportunity. An opportunity to buy it between 860 and 865 would be brilliant. Keeping 850 as the stop loss, we should be booking partial profits at 915 and 935 and full profits near 960 (the 78.6% Fibonacci retracement). Please do subscribe to my posts, so that all posts are delivered free to your inbox and you don't miss any useful analysis of the markets in the future. Happy Investing!!!